<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997, or
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-13459
AXIOHM TRANSACTION SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 94-2917470
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or organization No.)
</TABLE>
15070 Avenue of Science, San Diego, California 92128
(Address of principal executive office)
Registrant's telephone number, including area code: (619) 451-3485
------------------------
Indicate by check mark whether registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES _X_ NO ____
As of October 31, 1997 there were 6,512,926 shares of the registrant's
Common Stock outstanding.
This Amendment No. 1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 (the "Form 10-Q") is being filed solely for
the purpose of amending Part 1--Financial Information to the Form 10-Q.
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<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets:
September 30, 1997 and December 31, 1996............................................................... 1
Condensed Consolidated Statements of Operations:
Three months and Nine months ended September 30, 1997, and September 30, 1996.......................... 2
Condensed Consolidated Statements of Cash Flows:
Nine months ended September 30, 1997, and September 30, 1996........................................... 3
Notes to Condensed Consolidated Financial Statements..................................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................................... 9
PART II: OTHER INFORMATION
Item 2. Changes in Securities.............................................................................. 19
Item 6. Exhibits and Reports on Form 8-K................................................................... 19
SIGNATURES................................................................................................. 21
EXHIBITS INDEX............................................................................................. 22
</TABLE>
i
<PAGE>
PART 1--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30,
-------------
1996
SEPTEMBER 30, -------------
-------------
1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... 36,248 1,839
Restricted cash................................................................... 8,594 --
Accounts receivable, net.......................................................... 32,295 10,552
Inventories....................................................................... 28,523 13,900
Prepaid expenses and other current assets......................................... 9,487 3,286
------------- ------
Total current assets............................................................ 115,147 29,577
Fixed assets, net of accumulated depreciation..................................... 20,928 11,235
Intangible assets................................................................. 86,839 2,606
Other assets...................................................................... 5,240 560
------------- ------
Total assets.................................................................... 228,154 43,978
------------- ------
------------- ------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................................................. 15,082 7,480
Current portion of long-term debt................................................. 4,060 2,322
Accrued payroll, payroll taxes and benefits....................................... 4,877 --
Accrued expenses and other current liabilities.................................... 7,529 5,703
Income taxes payable.............................................................. 3,140 --
Deferred revenue.................................................................. 493 --
------------- ------
Total current liabilities....................................................... 35,181 15,505
Non-current liabilities:
Senior subordinated debt.......................................................... 187,800 --
Other long-term debt and long-term liabilities.................................... 15,919 10,483
Deferred tax liability............................................................ 1,627 1,557
------------- ------
Total liabilities................................................................... 240,527 27,545
------------- ------
Shareholders' equity (deficit):
Preferred shares, no par value Authorized: 1,000,000 shares, none issued.......... -- --
Common shares:
Common stock, authorized: 28,500,000 shares; issued and outstanding: 6,512,926
shares in 1997 and 1996....................................................... 23,851 4,167
Foreign currency translation adjustment........................................... (107) 117
Retained earnings (accumulated deficit)........................................... (36,117) 12,149
------------- ------
Total shareholders' equity (deficit)............................................ (12,373) 16,433
------------- ------
Total liabilities and shareholders' equity...................................... 228,154 43,978
------------- ------
------------- ------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
1
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30
--------------------- ---------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- --------- ---------- ---------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales........................................................... $ 42,943 $ 25,556 $ 99,558 $ 71,965
Cost of net sales................................................... 28,176 18,216 66,978 49,792
---------- --------- ---------- ---------
Gross margin........................................................ 14,767 7,340 32,580 22,173
Operating expenses:
Selling, general and administrative............................... 8,179 2,928 13,878 8,303
Research and development.......................................... 2,575 1,645 6,198 4,702
In-process technology............................................. 50,831 -- 50,831 --
---------- --------- ---------- ---------
Total operating expenses............................................ 61,585 4,573 70,907 13,005
Income (loss) from operations....................................... (46,818) 2,767 (38,327) 9,168
Interest and other income........................................... 327 23 390 1,229
Interest and other expense.......................................... 2,715 267 3,077 946
---------- --------- ---------- ---------
Income (loss) before income taxes................................... (49,206) 2,523 (41,014) 9,451
Income taxes........................................................ 2,272 967 5,484 3,657
---------- --------- ---------- ---------
Net income (loss)................................................... $ (51,478) $ 1,556 $ (46,498) $ 5,794
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Net income (loss) per share......................................... $ (7.90) $ 0.24 $ (7.14) $ 0.93
Weighted average number of shares outstanding
Per share (primary and fully diluted):.............................. 6,513 6,513 6,513 6,243
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
<S> <C> <C>
1997 1996
---------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Cashflows from operating activities:
Net income (loss)........................................................................ $ (46,498) $ 5,794
Adjustments to reconcile net income (loss) to net cash provided by operations:
Write off of acquired in-process technology............................................ 50,831 --
Depreciation and amortization.......................................................... 5,369 2,008
Other non-cash charges................................................................. 450 939
Changes in assets and liabilities, net of effects of acquisition of business:
Accounts receivable.................................................................... (8,909) (4,851)
Inventory.............................................................................. (1,323) 1,738
Prepaid expenses and other assets...................................................... 4,819 (501)
3,962 4,466
---------- ---------
Net cash provided by operating activities.................................................. 8,701 9,593
Cashflows from investing activities
Payment for acquisition of business, net of cash acquired................................ (148,074) --
Capital expenditures..................................................................... (3,670) (2,532)
---------- ---------
Net cash used in investing activities...................................................... (151,744) (2,532)
Cashflows from financing activities:
Proceeds from tender financing........................................................... 186,979 --
Net repayment under line of credit....................................................... (1,051) (759)
Principal repayments on long term debt................................................... (5,000) (8,216)
Dividends................................................................................ (1,768) (411)
Proceeds from stock issuance, net of issuance costs...................................... -- 3,807
Debt issuance costs...................................................................... (2,799) --
Loans to related parties................................................................. 1,713 (388)
---------- ---------
Net cash provided by (used in) financing activities........................................ 178,074 (5,967)
Effect of exchange rate changes on cash.................................................... (622) 12
Net increase in cash and cash equivalents.................................................. 34,409 1,106
Cash and cash equivalents at beginning of period........................................... 1,839 636
---------- ---------
Cash and cash equivalents at end of period................................................. $ 36,248 $ 1,742
---------- ---------
---------- ---------
Supplemental Cashflow Disclosures:
Interest paid............................................................................ $ 488 $ 848
Income taxes paid net of refunds......................................................... $ 4,723 $ 2,224
Schedule of non-cash investing and financing activities:
Acquisition of business:
Fair value of assets acquired, net of cash acquired.................................... $ 134,480 $ --
In process technology.................................................................. $ 50,831 $ --
Liabilities assumed.................................................................... $ (17,995) $ --
Fair value of non-tendered stock....................................................... $ (19,242) $ --
---------- ---------
Cash paid, net of cash acquired........................................................ $ 148,074 $ --
</TABLE>
During 1996, the Company financed certain capital expenditures totaling
$163,000 through the incurrence of capital lease obligations.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 1: UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and nine month periods ended
September 30, 1997 are not necessarily indicative of the results which may be
expected for the year ended December 31, 1997 or any other period. Reference is
made to the Consolidated Financial Statements and Notes thereto included in the
AX Acquisition Corporation's Schedule 14D-1 filing dated July 16, 1997, for
further information.
NOTE 2: BASIS OF PRESENTATION
On August 21, 1997, pursuant to an Agreement and Plan of Merger dated as of
July 14, 1997 (the "Agreement of Merger"), AX Acquisition Corporation ("AX"), a
wholly-owned subsidiary of Axiohm S.A., acquired approximately 88%, or 7,000,000
shares, of the outstanding Common Stock of DH Technology, Inc. ("DH Technology")
through a public tender offer to the shareholders of DH Technology at a price of
$25 per share (the "Tender Offer").
On October 2, 1997, pursuant to the Agreement of Merger, AX acquired 100% of
the outstanding Common Stock of Axiohm S.A. in exchange for 5,518,524 shares of
DH Technology Common Stock and $12.2 million in cash (the "Share Exchange
Offer"). Simultaneous with the Share Exchange Offer, DH Technology purchased all
of the outstanding shares of AX in exchange for the assumption of approximately
$190 million of debt (the "Acquisition Financing") incurred by AX to finance the
Tender Offer. Immediately after the Share Exchange Offer, AX was merged with and
into DH Technology (the "Merger"), the surviving legal entity, and the company
changed its name from "DH Technology, Inc." to "Axiohm Transaction Solutions,
Inc". Immediately after the Merger, approximately 85% of DH Technology's
outstanding Common Stock was held by the former shareholders of Axiohm S.A. and
15% was held by the former public shareholders of DH Technology, Inc. Axiohm
S.A. and its subsidiaries and DH Technology and its subsidiaries are hereinafter
referred to collectively as the "Company".
The Tender Offer, the Share Exchange Offer and the Merger (collectively the
"Acquisition") have been accounted for as a reverse acquisition, in which Axiohm
S.A. was treated as the acquiror for accounting purposes. Accordingly, the
historical financial information for periods prior to August 31, 1997 are those
of Axiohm S.A. The effective date of the Acquisition and Merger of DH Technology
for accounting purposes was August 31, 1997, and, accordingly, the capital
structure of the Company has been retroactively restated to reflect the number
of shares outstanding as a result of the Acquisition. The results of operations
for the three and nine month periods ended September 30, 1997 include the
operations of DH Technology for the month of September 1997.
4
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 3: ACQUISITION
The Acquisition of DH Technology has been accounted for using the purchase
method of accounting. The aggregate purchase price of $208.6 million was
allocated based on the fair values of tangible and intangible assets acquired
and consisted of the following:
<TABLE>
<S> <C>
Cash paid for DH Technology shares............................ $175,000,000
Cash paid for DH Technology options........................... 12,720,000
Transaction costs............................................. 1,667,000
Fair value of DH Technology nontendered shares (1)............ 19,242,000
-----------
Total......................................................... $208,629,000
-----------
-----------
</TABLE>
- ------------------------
(1) Recorded as an increase to common stock on the accompanying condensed
consolidated balance sheet.
The Company expects that the final purchase price allocation will be known
by December 31, 1997 and could differ from the preliminary allocation. A summary
of the preliminary purchase price allocation is as follows:
<TABLE>
<S> <C>
Net tangible assets acquired.................................. $76,152,000
In-process research and development........................... 50,831,000
Acquired technology........................................... 22,910,000
Customer lists................................................ 5,100,000
Workforce..................................................... 2,100,000
Goodwill...................................................... 51,536,000
-----------
Total......................................................... $208,629,000
-----------
-----------
</TABLE>
The purchased in-process research and development had not reached
technological feasibility, had no future uses, and was charged to operations
upon acquisition. Goodwill and other intangibles are being amortized over three
years using the straight line method, which is the period estimated to be
benefited.
Of the cash paid for the DH Technology stock options, $8.6 million was
funded to a Rabbi trust and is reflected on the balance sheet as restricted
cash.
The Acquisition Financing consisted of $166.2 million of senior indebtedness
under a credit facility with an institutional lender and $24 million of interim
preferred stock financing. Both of these amounts were fully repaid on October 2,
1997 with the proceeds from a private placement of $120 million of 9 3/4% Senior
Subordinated Notes due 2007 and borrowings under an $85 million Credit
Agreement. See Note 5 of the Notes to Condensed Consolidated Financial
Statements.
The following unaudited pro forma information has been prepared assuming
that the Acquisition and the Acquisition Financing had occurred at the beginning
of the periods presented. Pro forma adjustments included increased amortization
for the purchase price in excess of assets acquired; in-process research and
development expense; increased interest expense from the Acquisition Financing;
and related income tax
5
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 3: ACQUISITION (CONTINUED)
effects. The pro forma information does not reflect any potential cost savings
from combining the operations of DH Technology and Axiohm S.A.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
<S> <C> <C>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
Net sales............................................. $ 158,289,000 $ 159,222,000
Net loss.............................................. $ 69,239,000 $ 67,156,000
Net loss per share.................................... $ 10.63 $ 10.76
Weighted average number of shares outstanding......... 6,512,926 6,242,926
</TABLE>
The pro forma information is provided for information purposes only and does
not purport to be indicative of the Company's results of operations that would
actually have been achieved had the Acquisition and the Acquisition Financing
been completed at the beginning of the periods presented, or results that may be
obtained for the year ended December 31, 1997 or for any other period. See Note
5 of the Notes to Condensed Consolidated Financial Statements.
NOTE 4: INVENTORIES
The composition of inventories at September 30, 1997 and December 31, 1996
was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Raw materials.......................................... $ 32,612,000 $ 13,345,000
Work in process........................................ 512,000 949,000
Finished goods......................................... 3,015,000 1,793,000
------------------ -----------------
Totals................................................. $ 36,139,000 $ 16,087,000
------------------ -----------------
------------------ -----------------
</TABLE>
NOTE 5: SUBSEQUENT EVENTS
SENIOR SUBORDINATED NOTES
On October 2, 1997, the Company completed a private placement (the "Senior
Notes Offering") of $120 million of its 9 3/4% Senior Subordinated Notes due
2007 (the "Senior Notes"). The Senior Notes were placed with Lehman Brothers
Inc. as initial purchaser (the "Initial Purchaser") and were subsequently resold
by the Initial Purchaser in the United States to "qualified institutional
buyers" in reliance on Rule 144A under the Securities Act of 1933, as amended,
(the "Securities Act") and outside of the United States in offshore transactions
to foreign investors in reliance on Regulation S under the Securities Act. The
underwriting discount to the Initial Purchaser was 2.75% of the principal amount
of the Senior Notes purchased (or an aggregate of $3.3 million).
Interest on the Senior Notes is payable semi-annually on April 1 and October
1, commencing on April 1, 1998, until maturity on October 1, 2007. The Senior
Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after October 1, 2002 at various premiums to original face value. The
Company's payment obligation under the Senior Notes is jointly and severally
fully and unconditionally guaranteed on a senior subordinated basis by certain
of the Company's subsidiaries ("the Guarantors"), all of which are directly or
indirectly wholly-owned by the Company. The proceeds from the
6
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
sale of the Senior Notes, together with borrowings under the $85 million Credit
Agreement (see below) and existing cash were used to repay principal and accrued
interest under the Acquisition Financing.
Pursuant to a Registration Rights Agreement dated October 2, 1997 (the
"Registration Rights Agreement") among the Company, certain of the Company's
U.S. subsidiaries, as Guarantors, and the Initial Purchaser, the Company and the
Guarantors have agreed to use their best efforts to file a registration
statement no later than 60 days after the closing of the Senior Notes Offering,
with respect to an offer to exchange the Senior Notes for new senior
subordinated notes of the Company (the "New Notes") registered under the
Securities Act, with terms identical to those of the Senior Notes, and to cause
such registration statement to become effective no later than 120 days after the
closing of the Senior Notes Offering. The Senior Notes and the New Notes are
hereinafter referred to collectively as the "Notes". The holders of the Notes
are entitled to certain penalty payments from the Company under certain
circumstances if the Company and the Guarantors are not in compliance with their
obligations under the Registration Rights Agreement.
The following consolidating financial information is presented for purposes
of complying with the reporting requirements of the Guarantor Subsidiaries.
Separate financial statements and other disclosures with respect to the
Guarantor Subsidiaries are not presented because the Company believes that such
financial statements and other information would not provide additional
information that is material to investors. The condensed consolidating financial
information presents condensed financial statements as of September 30, 1997 and
for the nine months ended September 30, 1997 of:
(a) the Company on a parent company only basis ("Parent") (carrying its
investments in the subsidiaries under the equity method);
(b) the Guarantor Subsidiaries (Axiohm S.A.R.L., Axiohm Investissements
S.A.R.L., Axihom IPB, Inc., Cognitive L.L.C., Cognitive Solutions, Inc., and
Stadia Colarado Corp., but excluding Dardel Technologies E.U.R.L.);
(c) the Non-Guarantor Subsidiaries (DH Technology Plc, DH Technology Pty, DH
Technologia, Axiohm Ltd. (Hong Kong), and Axiohm Japan Inc.);
(d) the elimination of entries necessary to consolidate the Parent Company and
its subsidiaries; and
(e) the Company on a consolidated basis.
The condensed consolidating financial information also presents condensed
financial statements for the nine months ended September 30, 1996 of:
(a) the Guarantor Subsidiaries which were in existence and were within the
Company's consolidated structure as of September 30, 1996 (Axiohm S.A.R.L.
and Axiohm IPB, Inc., but excluding Dardel Technologies E.U.R.L.),
(b) The Non-Guarantor Subsidiaries which were in existence and were within the
Company's consolidated structure as of September 30, 1996 (Axiohm Ltd. (Hong
Kong) and Axiohm Japan Inc.),
(c) elimination entries necessary to consolidate such Guarantor and
Non-Guarantor Subsidiaries, and
(d) such Guarantor and Non-Guarantor Subsidiaries on a consolidated basis.
7
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
(SEPTEMBER 30, 1997--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash..................................... $ 41,151 $ (5,455) $ 552 $ -- $ 36,248
Restricted cash.......................... 8,594 -- -- -- 8,594
Accounts Receivable...................... 8,413 21,895 3,749 (1,762) 32,295
Inventories.............................. 5,262 19,573 3,828 (140) 28,523
Other assets............................. (19,213) 34,610 1,073 (6,983) 9,487
---------- ----------- -------------- ------------ ------------
Total current assets................... 44,207 70,623 9,202 8,885 115,147
Fixed assets, net........................ 5,080 14,253 1,595 -- 20,928
Intangibles.............................. 84,074 2,783 (18) -- 86,839
Other assets............................. 4,907 614 27 (308) 5,240
Investment in subsidiaries............... 43,093 -- -- (43,093) --
---------- ----------- -------------- ------------ ------------
Total assets........................... $ 181,361 $ 88,273 $ 10,806 $ (52,286) $ 228,154
---------- ----------- -------------- ------------ ------------
---------- ----------- -------------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................... 2,159 11,465 3,220 (1,762) 15,082
Current portion of long-term debt........ 2,915 1,109 36 -- 4,060
Accrued expenses and other liabilities... 13,412 5,546 448 (7,000) 12,406
Income taxes payable..................... 1,087 1,680 373 -- 3,140
Deferred revenue......................... 269 224 -- -- 493
---------- ----------- -------------- ------------ ------------
Total current liabilities.............. 19,842 20,024 4,077 (8,762) 35,181
Senior subordinated debt................. 163,800 24,000 -- -- 187,800
Other long term debt and other
obligations............................ 9,854 5,476 589 -- 15,919
Deferred tax liability................... -- 1,627 -- -- 1,627
---------- ----------- -------------- ------------ ------------
Total liabilities...................... 193,496 51,127 4,666 (8,762) 240,527
---------- ----------- -------------- ------------ ------------
Shareholders' equity (deficit):
Common Stock............................. 23,851 4,167 367 (4,534) 23,851
Foreign currency, translation
adjustment............................. 131 (253) 13 2 (107)
Retained earnings (accumulated
deficit)............................... (36,117) 33,232 5,760 (38,992) (36,117)
---------- ----------- -------------- ------------ ------------
Total shareholders' equity (deficit)... (12,135) 37,146 6,140 (43,524) (12,373)
---------- ----------- -------------- ------------ ------------
Total liabilities and shareholders'
equity............................... $ 181,361 $ 88,273 $ 10,806 $ (52,286) $ 228,154
---------- ----------- -------------- ------------ ------------
---------- ----------- -------------- ------------ ------------
</TABLE>
8
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
(FOR THE NNE MONTHS ENDED SEPTEMBER 30, 1997--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 6,166 $ 91,807 $ 4,040 $ (2,455) $ 99,558
Cost of net sales.......................... 4,160 61,858 3,415 (2,455) 66,978
---------- ----------- ------- ------------ ------------
Gross margin............................... 2,006 29,949 625 -- 32,580
Operating expenses:
Selling, general and administrative...... 3,457 9,399 730 292 13,878
Research and development................. 322 5,832 44 -- 6,198
In-process technology.................... 50,831 -- -- -- 50,831
---------- ----------- ------- ------------ ------------
Total operating expenses................... 54,610 15,231 774 292 70,907
---------- ----------- ------- ------------ ------------
Income (loss) from operations.............. (52,604) 14,718 (149) (292) 38,327
Interest and other income.................. 284 89 17 -- 390
Interest and other expense................. (3,588) 512 (1) -- (3,077)
---------- ----------- ------- ------------ ------------
Income (loss) before income taxes.......... (55,908) 15,319 (133) (292) (41,014)
---------- ----------- ------- ------------ ------------
Income taxes............................... (201) 5,838 (51) (102) 5,484
---------- ----------- ------- ------------ ------------
Net income (loss).......................... $ (55,707) $ 9,481 $ (82) $ (190) $ (46,498)
---------- ----------- ------- ------------ ------------
---------- ----------- ------- ------------ ------------
</TABLE>
9
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
(FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net cash flows from operating activities.... 4,169 6,644 (1,997) (115) 8,701
Cash flows from investing activities:
Payment for acquisition of business, net
of cash acquired........................ (147,522) 552 -- -- (148,074)
Capital expenditures...................... (15) 3,655 -- -- (3,670)
---------- ------ ------ --- ------------
Net cash used in investing activities... (147,537) (4,207) -- -- (151,744)
---------- ------ ------ --- ------------
Cash flows from financing activities:
Proceeds from tender financing............ 186,979 -- -- -- 186,979
Net repayment under line of credit........ -- (1,017) (34) -- (1,051)
Principal payments under long-term debt... -- (4,994) (6) -- (5,000)
Dividends................................. -- (1,768) -- -- (1,768)
Debt issuance costs....................... (1,050) (1,749) -- -- (2,799)
Loans to related parties.................. (728) (33) 2,474 -- 1,713
---------- ------ ------ --- ------------
Net cash provided by financing
activities............................ 185,201 (9,561) 2,434 -- 178,074
---------- ------ ------ --- ------------
Effect of exchange rates on cash............ (682) (55) -- 115 (622)
---------- ------ ------ --- ------------
Net increase (decrease) in cash and
equivalents............................... 41,151 (7,179) 437 -- 34,409
Cash and equivalents at beginning of
period.................................... -- 1,724 115 -- 1,839
---------- ------ ------ --- ------------
Cash and equivalents at end of period....... 41,151 (5,455) 552 -- 36,248
---------- ------ ------ --- ------------
---------- ------ ------ --- ------------
</TABLE>
10
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
(FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES(1) SUBSIDIARIES(2) ELIMINATIONS CONSOLIDATED
-------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.............................................. $ 71,944 $ 990 $ (969) $ 71,965
Cost of net sales...................................... 49,768 889 (865) 49,792
------- ------ ------------ ------------
Gross margin........................................... 22,176 101 (104) 22,173
Operating expenses:
Selling, general and administrative.................. 7,902 401 -- 8,303
Research and development............................. 4,806 -- (104) 4,702
------- ------ ------------ ------------
Total operating expenses............................... 12,708 401 (104) 13,005
------- ------ ------------ ------------
Income (loss)from operations........................... 9,468 (300) -- 9,168
Interest and other income.............................. 1,227 2 -- 1,229
Interest and other expense............................. 943 3 -- 946
------- ------ ------------ ------------
Income (loss) before income taxes...................... 9,752 (301) -- 9,451
------- ------ ------------ ------------
Income taxes........................................... 3,657 -- -- 3,657
------- ------ ------------ ------------
Net income (loss)...................................... $ 6,095 $ (301) $ -- $ 5,794
------- ------ ------------ ------------
------- ------ ------------ ------------
</TABLE>
- ------------------------
(1) Includes only Axiohm S.A.R.L. and Axiohm IPB, Inc.
(2) Includes only Axiohm Ltd. (Hong Kong) and Axiohm Japan Inc.
11
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
(FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES(1) SUBSIDIARIES(2) ELIMINATIONS CONSOLIDATED
-------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES................. 9,791 (198) -- 9,593
CASH FLOWS FROM INVESTING ACTIVITIES--CAPITAL
EXPENDITURES....................................... (2,523) (9) -- (2,532)
------- ------- ----- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment under line of credit................. (795) 36 -- (759)
Principal payments under long-term debt............ (8,216) -- -- (8,216)
Dividends.......................................... (411) -- -- (411)
Proceeds from stock issuance....................... 3,807 -- -- 3,807
Loans to related parties........................... (598) 210 -- (388)
------- ------- ----- ------------
Net cash used in financing activities............ (6,213) 246 -- (5,967)
------- ------- ----- ------------
Effect of exchange rates on cash..................... 15 (3) -- 12
------- ------- ----- ------------
Net increase (decrease) in cash and equivalents...... 1,070 36 -- 1,106
Cash and equivalents at beginning of period.......... 626 10 -- 636
------- ------- ----- ------------
Cash and equivalents at end of
period............................................. 1,696 46 -- 1,742
------- ------- ----- ------------
------- ------- ----- ------------
</TABLE>
- ------------------------
(1) Includes only Axiohm S.A.R.L. and Axiohm IPB, Inc.
(2) Includes only Axiohm Ltd. (Hong Kong) and Axiohm Japan Inc.
12
<PAGE>
SENIOR BANK CREDIT AGREEMENT
On October 2, 1997, the Company entered into a Credit Agreement (the "Credit
Agreement") with a syndicate of banks (the "Banks"), led by Union Bank and
Lehman Brothers which acted as agent. Pursuant to the Credit Agreement, the
Banks have extended the Company a two tranche amortizing term loan in the
original principal amount of $50 million (the "Term Loan") and established a $35
million revolving line of credit (the "Revolver") available through October 2,
2002. The Term Loan consists of a Tranche A term loan in an aggregate principal
amount of $35 million, which has a maturity of five years, and a Tranche B term
loan in an aggregate principal amount of $15 million, which has a maturity of
six years. The Term Loan and Revolver are secured by a lien on substantially all
of the real and personal property of the Company and certain of its subsidiaries
and a pledge of capital stock of certain of its subsidiaries (provided that no
lien was or will be granted on the assets of Foreign Subsidiaries (as defined)
and no capital stock of Foreign Subsidiaries will be pledged to the extent that
the granting of such lien or the making of such pledge would result in
materially adverse United States federal income tax consequences to the Company
or would violate applicable law). The proceeds of the Term Loan and the initial
advance under the Revolver were used by the Company to repay principal and
accrued interest under the Acquisition Financing. Both the Term Loan and the
Revolver have interest rate options including an interest rate based on the
Eurodollar Rate plus a margin of between 2.5% to 3%. Such margins will vary
depending upon the relationship between the Company's earnings before interest,
taxes, depreciation and amortization ("EBITDA") and the then aggregate total
debt outstanding. The Company is required to pay a fee of 0.375% per annum on
the unused portion of the Revolver. Under the Credit Agreement, the Company is
required to enter into arrangements to provide interest protection for $20
million of this floating rate debt for two years. The Credit Agreement contains
various restrictive covenants with which the Company must comply. The more
significant covenants relate to: limitations of capital expenditures,
established maximum debt to EBITDA ratios, minimum interest coverage ratios,
minimum fixed charge ratios, and limitations on indebtedness related to capital
leases and certain of the Company's subsidiaries. Required principal payments
under the New Credit Facility and Notes are as follows: $3.2 million in 1998;
$7.85 million in 1999; $7.85 million in 2001; $9.3 million in 2001; $9.3 million
in 2002; $12.5 million in 2003; and $120 million in 2007.
NOTE 6: SHAREHOLDERS EQUITY
On June 24, 1996, Axiohm received net proceeds of $3.8 million from a
private placement of 421,200 shares of Common Stock to an employee of Axiohm and
two institutional investors.
On June 24, 1996, Axiohm declared a cash dividend of $0.4 million on Common
Stock which was paid to shareholders of record on June 24, 1996.
On May 14, 1997, Axiohm declared a cash dividend of $1.8 million on Common
Stock which was paid to shareholders of record on May 14, 1997.
In September 1997, in connection with the Acquisition an officer of the
Company was granted options to purchase 231,118 shares of the Company's Common
Stock at an exercise price of $7.15 per share. The fair market value of the
Company's Common Stock was $17 per share on the date of grant, resulting in
compensation expense totalling $2,277,000. Included in the accompanying
condensed consolidated statement of operations for the nine months ended
September 30, 1997 is $455,000 of this total charge. The remaining $1,822,000 of
compensation expense will be recognized over a four year period coinciding with
with the option vesting schedule.
NOTE 7: COMMITMENTS AND CONTINGENCIES
In connection with the August 1994 acquisition by DH Technology of all of
the outstanding stock of Cognitive Solutions, Inc. ("Cognitive"), a designer,
manufacturer and marketer of thermal bar code printers and complementary label
media for use in automatic data collection systems, the Company is
13
<PAGE>
NOTE 7: COMMITMENTS AND CONTINGENCIES (CONTINUED)
obligated to pay $0.5 million on August 15 in each of 1998 and 1999. The Company
also may be required to make additional payments, not to exceed $3.0 million, to
the former shareholder of Cognitive, based upon net sales of a specified
Cognitive product line.
In connection with the December 1994 acquisition by Axiohm S.A. of the
transaction printer business of NCR Corporation ("NCR"), now known as Axiohm
IPB, for up to $30.6 million, of which $15.6 million was paid at closing, $0.5
million has been paid to date in earn-out payments and a final payment of up to
$5.0 million may be paid in additional earn-out payments based upon 1997 sales.
The Company estimates that the final payment will be less than approximately
$1.5 million and is anticipated to be paid in 1998. Axiohm S.A. recorded
approximately $3.0 million of goodwill in connection with this acquisition,
which was accounted for using the purchase method of accounting.
In connection with the March 1997 acquisition by DH Technology of certain
assets and liabilities of American Magnetics Corporation ("AMC"), a designer,
manufacturer, and marketer of card reader modules and stand-alone card readers,
and a wholly-owned subsidiary of Group 4 Securitas Holdings, a Netherlands
company, for $5.7 million, of which $4.85 million was paid at closing, an
additional $0.8 million will become payable in the years of 2000 and 2001. Based
upon attainment of specified net sales, an additional $1.6 million may also
become payable.
In connection with the purchase and improvement of manufacturing facilities
in France, Axiohm S.A. negotiated in 1994 a $1.6 million grant (the "Grant")
from various agencies of the French government. The Company is contingently
liable to those agencies for the repayment, in whole or in part, of the Grant in
the event that the Company does not meet the requirements of the Grant, which
include minimum employment levels through 1997, minimum capital expenditures and
continued use of the building throughout the lease term.
In connection with the resignation of the Company's Chief Executive Officer,
the Company entered into a Resignation Agreement and a separate Noncompetition
Agreement dated January 10, 1998. The Resignation Agreement provides for
payments to the former President of approximately $1,525,000 pursuant to an
option cancellation agreement dated August 10, 1997. Additionally, the Company
will pay the former President $1,350,000 in consideration for his agreement not
to compete with the Company for a period of two years.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AXIOHM TRANSACTION SOLUTIONS,
INC. BY:
February 12, 1998 /s/ JANET W. SHANKS
------------------- ---------------------------------------------
Date Janet W. Shanks
JANET W. SHANKS, CHIEF ACCOUNTING OFFICER
(CHIEF ACCOUNTING OFFICER)
15
